Alex Tolbert: Uber car service offers lessons for health care

Jan. 15, 2014

Larry McCormack / File / The Tennessean

Written by

Alex Tolbert

For The Tennessean

As happens every New Year’s Eve, more Nashvillians needed a taxi than normal. People say the wait time for the typical “AAA Taxi” service was around two hours. Fortunately, the typical “AAA Taxi” service wasn’t the only way to get around this year.

Enter Uber. This nontraditional car service allows you to order a car on your phone and track it as it makes its way to pick you up. Founded in San Francisco in 2010, it launched in Nashville in December. New Year’s Eve, an Uber ride was available within 15 minutes all night long. How did it pull this off? With something the company calls “surge pricing,” which causes more of its drivers to be willing to drive when there are surges in demand.

How does “surge pricing” work? Well, part of Uber’s brand promise is to always have a car for you when you need it. Under normal conditions, Uber costs about the same as a taxi and wins on “ease of use.” When demand is abnormally high, the company institutes “surge pricing” to encourage more of its drivers (who get 80 percent of the fare) to be available to drive. With this approach, the company is reliably able to fulfill its promise of having a car for you when you need it.

How much was surge pricing on New Year’s? It ranged from three to five times Uber’s normal rate. This means to get from downtown to Green Hills it would have cost you $35-$55. Some people complain that it’s “unfair” of Uber to charge these higher prices, but others point out that without it, everyone would just be stuck waiting.

What does this have to do with health care?

Uber’s existence versus the typical “AAA Taxi” service puts a fine point on a reality that applies just as much to health care as it does to taxis. What’s that reality? When resources are limited, they have to be rationed with either time or money.

“AAA Taxi” services rationed with time on New Year’s Eve. Want a cab? The bad news is you’ll be put on a waiting list and wait two hours. The good news is that we’re charging you just like we would any other day of the year, and no one is getting better service based on ability to pay.

On the other hand, Uber rationed with money on New Year’s. Want a cab? The bad news is that it will cost you more. The good news is that we are able to offer you the same high quality as we would any other day of the year, and everyone is being given the same financial terms.

Rationing health care

Whether to ration health care with time or money is a difficult decision. In the United States, we’re known for rationing health care with money. Historically in Canada, they have rationed health care with time.

When rationing health care with time, money is no object. If you need care, you’ll get it. The only question is when. The bad news is some will have to wait too long and they’ll die as a result. The good news is that we’re treating everyone the same and no one is getting better service based on ability to pay.

When rationing health care with money, time is no object. If you need care, you’ll get it. The only question is if you can afford it. The bad news is some will not be able to afford it and they’ll die as a result. The good news is that the same high-quality care is immediately available to everyone on the same financial terms.

A happy medium?

But wait, couldn’t we have both worlds in health care just like we now do in taxi services? In other words, can’t we have a “AAA Taxi” health care system that provides a “base” level of care and a “Uber” health care system that more reliably gives us what we want when we need it?

Canada started to address this question by allowing an “Uber” system to start to develop after its Supreme Court ruled that “access to a waiting list is not access to health care.” In the U.S., many would argue that we’ve long had both a “AAA Taxi” system (Medicaid and charity clinics) and an “Uber” system (everyone else with commercial insurance or Medicare).

When a country has both systems, its health care controversy revolves around defining what the “base” level of care is to be provided by the “AAA Taxi” system.

Why is all of this important to the health care consumer? Many changes are coming with health care reform, including new provider networks and health care delivery models. Because health care is an increasingly limited resource, the question is less whether care is rationed than when, where, what and how. Understanding this can be important when choosing the right health plan for you and your family.

Alex Tolbert is the founder of www.bernardhealth.com, a company that provides noncommissioned, expert advice on health, Medicare and COBRA insurance and medical bill consulting. To learn more about Bernard Health, visit www.bernardhealth.com/.